Wall Street's major stock indexes closed lower on Tuesday, driven by a significant drop in chip stocks and a decline in oil prices. The technology-heavy Nasdaq led the losses, falling by 1% as concerns over demand weighed heavily on the semiconductor sector. Meanwhile, the energy sector experienced a 3% drop, reflecting weaker expectations for crude oil demand.
Key Takeaways
- Nasdaq Decline: The Nasdaq fell 1%, primarily due to a slump in chip stocks.
- Energy Sector Drop: Oil prices dropped, leading to a 3% decline in the energy sector.
- Mixed Earnings Reports: Financial services showed mixed results, with some companies performing well while others, like UnitedHealth, faced significant losses.
Chip Stocks Under Pressure
The chip sector faced intense scrutiny as Nvidia, a leading player in artificial intelligence chips, saw its shares drop by 4.7%. This decline followed a record-high close the previous day and was exacerbated by reports suggesting potential restrictions on AI chip exports by the Biden administration.
Additionally, ASML Holdings, a key chip-equipment manufacturer, reported disappointing sales expectations for 2025, causing its shares to plummet by 16%. This contributed to a 5.3% drop in the Philadelphia semiconductor index, marking its largest one-day decline since early September.
Kevin Gordon, a senior investment strategist at Charles Schwab, noted, "There seems to be a lot more stress concentrated in chips. This is putting downward pressure on technology as a sector." However, he also pointed out that the sell-off was not widespread, indicating that many stocks were still performing well.
Energy Sector Decline
The energy industry index experienced its most significant one-day percentage decline since early October, falling by 3%. This drop was attributed to lower crude oil prices, driven by reports indicating that Israel would not target Iranian oil facilities, leading to reduced demand expectations.
Market Performance Overview
- Dow Jones Industrial Average: Fell 324.80 points (0.75%) to 42,740.42.
- S&P 500: Lost 44.59 points (0.76%) to 5,815.26.
- Nasdaq Composite: Decreased by 187.10 points (1.01%) to 18,315.59.
Despite the declines, both the Dow and S&P 500 had registered record closing highs in the previous session, highlighting the volatility in the market.
Defensive Sectors Shine
While technology and energy sectors struggled, defensive sectors showed resilience. Real estate emerged as the biggest advancer, gaining 1.2%, followed by consumer staples and utilities, which rose by 0.6% and 0.5%, respectively.
In the financial sector, Bank of America shares increased by 0.5% after reporting a third-quarter profit that exceeded expectations. Charles Schwab shares surged by 6% following strong earnings, while Citigroup shares fell by 5% due to mixed results.
Looking Ahead
Investors are keenly awaiting upcoming earnings reports and key economic data, including monthly retail sales and industrial production figures. San Francisco Fed President Mary Daly indicated that despite recent interest rate cuts, efforts to control inflation remain a priority.
Traders are currently pricing in a 98% chance of a 25 basis point interest rate cut in November, according to CME's FedWatch tool.
As the market continues to navigate these fluctuations, the balance between growth and caution remains a focal point for investors.
